December 2011 Archives

Why MF Global's Last Days May Have Been Criminal

December 19, 2011
Why MF Global's Last Days May Have Been Criminal

By R. Tamara de Silva

December 19, 201

Last Thursday December 15, 2011 was MF Global Holdings Ltd.'s and MF Global Inc.'s Chief Executive Jon Corzine's third time to testify before Congress. He may not have faired all that well in light of Chicago Mercantile Exchange Group Chairman Terrance Duffy's testimony on December 13, 2011, which seemed to contradict Corzine's previous testimony. Corzine adjusted his testimony on December 15, 2011 to account for the seeming contradiction. However, how well Corzine may have done to avoid perjury or any role in a possible fraud remains to be seen. A closer examination of Corzine's testimony and the events leading up to MF Global's bankruptcy on October 31, 2011 suggests problems. If there is any purpose to be achieved in having Corzine testify again, lawmakers should focus their questions towards the failed purchase of MF Global by Interactive Brokers and all customer agreements, including emails between MF Global and account holders leading up to the purported transfers of $175 million and $700 million in as yet missing customer segregated funds and the firm's use of a type of repurchase agreement.

Were the Transfers Legal?

In my first article on MF Global, I suggested that the $1.2 billion missing from customer segregated funds may have been incurred due to over-leveraged positions in European sovereign debt that coincidentally took a dramatic turn for the worse (as they did in fact as yield curves doubled rapidly in some issues) during the last weeks of October, and that funds were transferred to cover margin in customer funds held in European debt. In this scenario, as I suggested, nothing illegal would have occurred because CFTC Rule 1.25 had been amended to permit the investment of customer segregated funds in foreign sovereign debt.

Moreover, if the money was transferred legally and without any fraud, but simply lost in the market, there may not be any right to recover the money by MF Global's customers in bankruptcy proceedings. The use of customer segregated funds for margin payments on repo-to-maturity ("RTM") transactions are not illegal and hence unlikely, without anything else, to be recoverable in bankruptcy.

An alternate illegal scenario is that MF Global may have engaged in some late stage embezzlement of customer funds that were supposed to be segregated from MF Global's accounts and never commingled with any other funds. [1] One way this may have occurred is if the funds were transferred out of customer segregated funds for a legal purpose but without the customers' meaningful consent or, more likely, with an intent to deceive the customer.

MF Global was permitted to invest customer funds, and borrow customer funds so long as the dollar value of the funds taken from the customer segregated accounts remained the same-the accounts were kept intact. For example, if MF Global used customer funds by transferring a specific amount of money out of customer segregated accounts; it was required to simultaneously deposit something of equal value in these accounts to equal the dollar value of what had been taken out.

If MF Global transferred customer funds out of segregated accounts as a loan to MF Global to cover margin calls in existing positions in sovereign debt, (perfectly legal) [2], it may however, be fraud and intent to deceive on its part if MF Global knew it could not repay the money. This fraud may have occurred if MF Global knew (and it would be interesting to argue how it did not) that it sought to legally borrow from customer funds, knowing that it was de facto insolvent and could not replace the money.

In other words, an acceptable use of customer segregated funds for margin payments may not exist if at the time MF Global made the transfers, it was insolvent or in the midst of a crisis where insolvency was around the corner to be seen. Even if MF Global asked for and obtained the consent of its of customers, or consent was not required according to customer agreements, and it legally borrowed the money from customers by replacing it with other collateral (collateral such as commercial paper, as permitted by CFTC Rule 1.25), the transfers would still be illegal because MF Global would be deceiving its customers-knowing it was already insolvent. Even though the rules likely permitted the replacement of funds with other collateral (and the collateral was used) MF Global's actions are arguably illegal because they were deceiving their customers knowing they would not be able to make the customers whole. Meaningful deception like this would be fraud and embezzlement in which case, the funds could be clawed back in bankruptcy proceedings-Please note that I am speculating a bit in specific statements about bankruptcy proceedings and do not specialize in this area of law.

Changing testimony or selective recall?

On December 8, 2011, Corzine testified before the House Agriculture Committee that he had "no idea where the money is" and that "I know I had no intention to ever authorize the transfer of segregated moneys. I know what my intentions were."

On December 13, 2011, Corzine testified that, "I never directed anyone at MF Global to misuse customer funds. I never intended to. And, as far as I am concerned, I never gave instructions that anybody could misconstrue."

On December 13, 2011 Terrance Duffy testified before the Senate Agriculture Committee. In Mr. Duffy's testimony he said that the CME has been conducting their own ongoing investigation of MF Global and discovered on December 10, 2011, after questioning a former MF Global employee who knew about the transfer of $175 of customer funds towards MF Global's broker dealer operations, that Corzine knew all about the transfers and likely authorized them.

On Thursday November 15, 2011 Corzine repeated that he did not authorize any illegal transfers, pointing to his General Counsel and Treasurer as the people who would know about the transfers. However, he was able to recall the $175 million transfer enough to tell the Committee that Duffy likely meant a loan advance from customer segregated funds to MF Global's European operations. Remember that all his previous testimony was to the effect that he, "was totally stunned to learn customer money was missing...did not learn about it until October 30, 2011...etc"- in this context it seems a tad odd for him to suddenly develop a very specific recall about one event of October 28, 2011. Sadly, this was wholly lost on the Committee, which asked not one follow-up question.

In addition to Mr. Duffy's testimony that a MF Global back office employee said Corzine was aware of the transfers, the Committee alluded to evidence that the Chief Financial Officer of MF Global's North American operations (presumably Christine Serwinski) said that Corzine knew about the transfers. If so, there are at least two or more MF Global employees and officers who contradict Corzine's sworn Sgt. Shultz testimony.

Not being perfectly honest with FINRA

On December 8, 2011, Steve Luparello, the Vice Chairman of the Financial Industry Regulatory Authority ("FINRA") also testified before the House Committee on Agriculture about MF Global's collapse. According to Mr. Luparello, MF Global was not completely candid with the Chicago Board of Options Exchange ("CBOE") and FINRA. In late September 2010, MF Global assured both regulatory bodies that it did not have any positions in European sovereign debt.[3] MF Global did in fact have positions in European sovereign debt during this time but because according to GAAP accounting rules, positions held in RTMs are treated as sales and not liabilities, MF Global did not violate the law in hiding its credit and risk exposure to RTM, which are liabilities in the real, non-accounting world. Technically, MF Global was able to get away with it, at least for a time.

A little background may be helpful and a story of another failed firm, Lehman Brothers that generously indulged in a cousin of RTMs, the Repo 105. The Repo 105 was utilized by Lehman Brothers, among other firms that did not survive the last financial crisis including Washington Mutual, Northern Rock and some that did like Citigroup.

This is how it worked and how a liability (a loan) can be transformed into a revenue-generating event (a sale)...if you are an investment bank that is. Lehman entered into repo transactions with offshore banks. Lehman would sell (though actually a loan) a bundle of toxic assets such as sub-prime mortgages and dubiously collateralized debt obligations to the bank. This transaction is characterized on the books of Lehman as a sale. Lehman agrees to buy back or repurchase (hence the term 'repo') the toxic assets at a later date (maturity). In this way, Lehman moves loans and bad assets off its balance sheets towards the end of each financial quarter-removing liabilities dramatically improves a balance sheet- as if they do not exist. Then Lehman reports the sale as a revenue-generating event, in effect moving by way of example, $39 billion off its balance sheet in what is a liability, and reporting it as a sale of $39 billion. It is fraudulent twice over in that Lehman does not disclose on its financials that it has an obligation (a debt to buy back) to pay back the amount loan and it reports the loan as revenue.

In effect, this is what MF Global did with FINRA and CBOE. However, the regulators caught MF Global's exposure to European sovereign debt and told MF Global to keep substantially more money in reserves because of what FINRA identified in May 2011 as a $7.6 billion risk exposure. MF Global appealed to the SEC and because of the appeal process, it was only in August that FINRA and the CBOE were successful in getting MF Global to put up more money for its European debt exposure and utilization of RTMs.

An accounting error

Also on December 15, 2011, the oversight panel of the House Financial Services Committee released a CME Group document the CME had given to the government containing a detailed log of its dealings with MF Global between October 24, 2011 and October 31, 2011. According to this document, Christine Serwinski, the Chief Financial Officer for North America at MF Global, and its Assistant Treasurer, Edith O'Brien, told a Mike Procajlo, an exchange auditor at 1:00 a.m. on Oct. 31, 2011 that the customer money was transferred on Oct. 27 and Oct. 28 and possibly Oct. 26, 2011. "About $700 million was moved to the broker-dealer side of the business to meet liquidity issues in a series of transactions on Thursday, Friday and possibly Wednesday," Serwinski told Procajlo about eight hours before the firm filed for the eighth-largest bankruptcy in United States history.

Barely three days prior, on October 28, 2011, MF Global had submitted a statement to the CME showing that it had $200,178,912 in excess cash in its customer segregated funds as of the close of October 27, 2011.

On October 30, 2011, an official from the CFTC informed Procajlo that a draft statement of the value of MF Global's customer segregated funds, showed a deficit in customer segregated funds for the day ending October 28, 2011. MF Global's Assistant Controller, Mike Bolan and its General Counsel, Laurie Ferber said they believe the customer-funds deficit is "an accounting error." Ms. Ferber had told the CME on October 25, 2011 that rumors about problems stemming from MG Global's European debt trading were not accurate.

On December 15, 2011 Mr. Duffy told the House Committee that this so called accounting error was "a telling sign that regulators were being kept in the dark" about MF Global's customer accounts. What was Corzine doing during all of this?

Acquisition by Interactive Brokers

While the exchange was trying to get to the bottom of the accounting error, whose magnitude would not be revealed until the evening of October 30, 2011 as being $900 million, Corzine and other MF Global officials were trying to close a deal to sell MF Global to Interactive Brokers Group, Inc. On that same day, October 30, 2011, MF Global issued a press release at 6:00 p.m. announcing that it had reached a deal with Interactive Brokers.

Corzine as CEO of MF Global negotiated the potential sale of his firm to Interactive Brokers. The first question involved in any sale of a going concern involves the determination of an acquisition price. Corzine would have had to know what the assets and liabilities of MF Global were (the balance sheets) to even begin to negotiate a price. The deal was happening at the exact same time of the transfers.

It is beyond the bounds of credibility to argue that MF Global did not have regular if not daily accounting of cash balance sheets and that Corzine did not see them. If Corzine knew what the company was worth, during the very days in which at least $900 million in customer segregated funds was lost, he must have at a minimum known about the company's impending insolvency. How then could he not have known of the transfers?

In addition, as a matter of course in the futures industry, MF Global likely had to report the total daily amounts carried in segregated funds to the CME-it certainly had to do so from October 24, 2011 onwards. This computation is performed as a matter of course every single day at every futures broker.

Corzine's testimony before Congress would have us believe that hundreds of millions of dollars were moved around without the knowledge or approval of the MF Global's CEO and CFO all while the balance sheets were being scrutinized for an acquisition by Interactive Brokers, which Corzine spear-headed.

Corzine has sworn under oath that he did not know anything about the missing money until October 30, 2011. This is simply not possible.

Suggestions for House and Senate Committees

Further education about the industry is in order. Both the House and Senate soft-peddled the issues, and perhaps unintentionally avoided important questions and asked almost no meaningful follow-up questions, allowing Corzine to stretch the bounds of credibility in evasiveness. Further questioning should focus, among other things, on the representations made by MF Global to Interactive Brokers on October 24, 2011-October 30, 2011.@
R. Tamara de Silva
Chicago, Illinois
December 19, 2011

R. Tamara de Silva is a securities lawyer and independent trader

2. Remember CFTC Rule 1.25 which had been amended to allow the investment of customer segregated funds in foreign sovereign debt, was amended back after the fall of MF Global to disallow the investment of customer segregated funds in foreign sovereign debt.

Was Corzine's Testimony About MF Global Truthful?

December 13, 2011

Was Corzine's Testimony About MF Global Truthful?

By R. Tamara de Silva

December 13, 2011

Testimony before Congress today revealed that MF Global had illegally transferred $175 million out of customer segregated funds towards its European broker-dealer operations before it went into bankruptcy proceedings and very much under Jon Corzine's stewardship. On December 8, 2011 and again today before Congress, Corzine testified under oath that he was not aware of any illegal transfer. Today's testimony of Chicago Mercantile Exchange Group Chairman, Terrance A. Duffy suggests that Corzine did know about the transfer.

My last article on MF Global stated that $1.2 billion in losses may have been incurred due to over-leveraged positions in European sovereign debt that coincidentally took a dramatic turn for the worse (they did in fact) during the last weeks of October, or alternatively, that MF Global had engaged in some late stage embezzlement of customer funds that are supposed to be segregated from MF Global's accounts and never commingled with any other funds.[1]

It now appears that Jon Corzine may be the best example of the why it makes sense to invoke the Fifth Amendment if you are not inclined to be anything other than completely honest because you simply will not get away with anything other than complete honesty under oath. Corzine testified before the House Agriculture Committee December 8, 2011 and today before the Senate Agriculture Committee. Today, according to the testimony of Chicago Mercantile Exchange Group ("CME"), Chairman Terrance A. Duffy, Corzine may have lied.

In Corzine's December 8th testimony, he essentially hems and haws and states that he cannot recall much of anything, things were chaotic during the last days of MF Global, he was completely lacking in mens rea, would not have authorized any transfer of customer money out of segregated funds, does not have all the records after he resigned and certainly did not intentionally do anything wrong. Nothing other than attempting to mislead Congress and lying.

On December 13, 2011, Corzine testifies that, "I never directed anyone at MF Global to misuse customer funds. I never intended to. And, as far as I am concerned, I never gave instructions that anybody could misconstrue."

Also on December 13, 2011 Terrance Duffy, Jill Sommers, Commissioner of the CFTC and James Giddens, MF Global's bankruptcy trustee also testified before the Senate Agriculture Committee.

In Mr. Duffy's testimony he says that the CME has been conducting their own ongoing investigation of MF Global and discovered on December 10, 2011, after questioning a former MF Global employee who knew about the transfer of $175 of customer funds towards MF Global's broker dealer operations (I am speculating that this was likely done to meet margin requirements on European debt bets that the firm thought would bounce back in time before anyone was the wiser) that Corzine knew all about the transfers. If Corzine knew about the transfer of $175 million, his testimony to the House Committee of December 8, 2011 wherein he stated that he knew nothing about it was untruthful. Corzine may well have already perjured himself.

Remember that on October 26, 2011, the CME had performed a spot audit on MF Global. On October 24, 2011, the CME initiated a heightened scrutiny of the segregated customer fund reporting of MF Global as a result of MF Global's market risk. Beginning on October 24, 2011, the CME's daily audits verified that customer funds were on deposit at the bank(s) where MF Global represented that they were and in the amount that they were supposed to be.

On October 26, 2011, the CFTC also went into MF Global to make sure that what MF Global reported to be holding in customer segregated funds matched bank balances. The CFTC's spot audit showed that no money was missing.

On October 25, 2011 MF Global reported a substantial quarterly loss due to having leverage of 40:1 on its exposure to European sovereign debt. Predictably, MF Global's stock collapsed and it its bonds began to trade at distressed levels. Corzine utilized all MF Global's credit lines and tried to secure a sale of the firm to Interactive Brokers. On October 26 or October 27, 2011 MF Global provided reports to the CME and CFTC that it had a $200 million surplus in customer accounts. In reality on October 27, 2011, it was covering up a $200 million deficit in customer funds.

Five days later on October 31, 2011, MF Global filed for bankruptcy. But MF Global had already lied to both the CME and CFTC and violated CFTC rules and committed fraud and embezzlement.

On the morning of November 2, 2011, the CME announced that MF Global may have transferred money "
in a manner that may have been designed to avoid detection insofar as MF Global
 did not disclose or report such transfers to the CFTC or CME until early morning on Monday, October 31, 2011." [2]

The first hint of missing customer funds came out in press report on October 31, 2011 when Interactive Brokers announced they are walking away from a purchase of MF Global due to accounting discrepancies. At first MF Global denied anything of the sort, only to admit on November 1, 2011 that there were shortfalls in customer accounts. [3]

There are in excess of $158 billion in customer-segregated funds in the United States. The futures markets unlike the securities markets have existed without any meaningful problem or shortfall in domestic customer segregated funds and without needing the existence of any protection like SIPC until October 31, 2011. It is inarguable that the futures markets have been the most crisis-free well functioning markets in the world and remain so. It is unfortunate that because of Jon Corzine these markets may now be portrayed as somehow unsafe for the investment of public funds.

The answer to Corzine is not more regulation but as I have written before, a simple amendment of CFTC Rule 1.25 to prohibit the investment of customer segregated funds in foreign sovereign debt-this amendment has already occurred. It was Corzine himself who lobbied for the change in Rule 1.25 to allow for customer-segregated funds to be held in foreign debt instruments.

Regulation can never rule out the rogue actor or sociopath and must not try because there really are not that many around-Corzine being a case in point. What is least needed is a reactionary and wholesale change in the regulation of the futures markets.@

R. Tamara de Silva
Chicago, Illinois
December 13, 2011

R. Tamara de Silva is a securities lawyer and independent trader


Blagojevich Sentenced to 14 Years

December 7, 2011
Blagojevich Sentenced to 14 Years

By R. Tamara de Silva

December 7, 2011

Former Illinois Governor, Rod Blagojevich was sentenced to 14 years today for trying to sell President Obama's vacant Senate seat or as the indictment stated, "efforts to illegally obtain campaign contributions in exchange for official action." Is it wrong to try to sell a Senate seat for personal gain? Of course it is. What the jury considered Blagojevich to have done was essentially commit attempted graft, or the act of attempting to profit or profiting from a political office for personal gain. However, getting excited about Blagojevich's conviction is a bit naïve. Despite all the time, publicity and millions of dollars spent on this single prosecution, in Illinois today there is still no conflict of interest rule regime in place, to prevent the trading of government office and services for personal gain-not even now. Blagojevich's conviction is bread and circuses that will for a time appease the gullible masses and unquestioning press. Bloodletting occurred and an unpopular and loudmouth politician with unforgivable hair succumbed to the lions as the crowds cheered.

What was punished today will be repeated tomorrow and all tomorrows thereafter, but without fanfare and long after the Blagojevich jokes have subsided because Illinois law, insofar that it does not meaningfully outlaw conflicts of interest by those in elected office to prevent self-dealing and graft, seems to condone it. Graft is the currency of Illinois politics and government, especially in Cook County. It occurs every day and on every floor of Chicago's City Hall. In Illinois, the act of differentiating between graft and what passes for legal local government operation in so many local government agencies is the pass on a razor's edge or an exercise in sophistry.

Graft, Horse-Trading, Earmarks and Lobbyists

Ideally, Blagojevich's case should be used to reexamine the role of graft and quid pro quo in politics-that is if the very premise of my suggestion is not itself horridly naïve in that horse trading, is a close cousin of graft and arises out of a shared principle-quid pro quo. Is graft very much different from efforts to legally obtain campaign contributions in exchange for official action? The rationale for what is legal and what is illegal in quid pro quo deals in politics ought to have no bearing on who the party is that is doing the asking and getting.

Arguably, the hundreds of billions of dollars spent on earmarks for pet projects by legislators for their projects back home are manifestations of quid pro quo thinly disguised under the veil of constituent democracy in action. When Congress or the White House does it, it cannot be called, "democracy," "lobbying" or "free speech," and criminal extortion or bribery if done by someone else...or can it?

Legislation creates industry, first by lobbyists and then many cottage industries to explain the legislation and its impact and meaning. The other effect of legislation other than the growth of government itself is earmarks--earmarks are simply quid pro quo.

In the case of congressional earmarks and sweetheart Washington deals, or just garden variety official action for campaign contributions, it seems at times that the line between illegal pay for play in politics and official quid pro quo is paper-thin.

For example, by the admission of the White House on May 28, 2010, White House Chief of Staff and current Chicago Mayor, Rahm Emanuel apparently asked former President Bill Clinton to ask Rep. Joe Sestak to drop a Democratic Pennsylvania Senate bid against Sen. Arlen Specter, in return offering unpaid advisory positions. What if the offer was simply phrased as, "I'll trade you Secretary of the Navy for you not to run against Spectre?" Can this be legal, however it was phrased? Or is this not quintessentially quid pro quo?

The dismissal of all charges against former Sen. Ted Stevens (R-Alaska) demonstrates how thorny public corruption cases can be probably because we are entering the grayest of modern areas in present day politics. What is politics without an examination of the almost direct relationship between earmarks and campaign contributions-think about this-because politics cannot exist without both, at every level? Legislation creates industry, first by lobbyists and then many cottage industries to explain the legislation and its impact and meaning. The other effect of legislation other than the growth of government itself is earmarks--earmarks are quid pro quo.

It is in this gray area that congressional earmarking thrives. Like in the markets increased transparency might have an impact on some of the most corruptive elements of the practice, but it is still a gamble and members of Congress must think that there is a better than even chance that it will pay off for years; they might escape detection and prosecution.

Arguably the only good earmark is a dead earmark. But by this logic, many laws would never get passed and politics would grind to a halt at the state and federal level. Using earmarks to buy campaign contributions, as pay offs to political cronies, to employ your relatives or your former staff members (all practices which are commonly found in earmarking) constitutes quid pro quo.

Ear-marks, which are legally given often times for campaign contributions are considered to be the legal part of quid pro quo in our political system. What is politics without an examination of the almost direct relationship between earmarks and campaign contributions? Think about this-because politics cannot exist without both, at every level. Lobbyists give campaign contributions for earmarks in legislation. Harry Reid received almost $1,000,000 in 2010 election cycle out of $4,447,000 spent by the Vegas casinos to keep online gambling illegal. Harry Reid lobbies to keep online gambling illegal and is the casinos' staunchest advocate on the issue. If this is not quid pro quo, what is it?

Pay to Play, the Illinois Way

Getting back to graft in Illinois, there are about a handful of politicians that divide the assets of the state and local governments like a Christmas pie and they do so by institutionalizing graft. Governor Blagojevich, though accused of being insufferably tacky at times, was in reality and despite his attraction to the spot light and its fascination of him, somewhat of a bit player. Someone once wrote that Illinois is different from every other state in that it was the one absolutely corrupt state in the Union. No one with anything but a cursory understanding of Illinois politics (a certain prominent columnist comes to mind) would dispute this.

To those that are inclined to think that Blagojevich's conviction will send a lesson to other Illinois politicians, you need read no further. To those more critically inclined, consider a few anecdotes that follow (there are so many others but their inclusion would be outside the scope of a blog) in light of mathematical set theory and you will see that while Blagojevich intersected with the lords of Cook County, he never really controlled the throne-not even close.

The largest real estate tax firms that practice at the Cook County Board of Review, the agency that adjudicates property tax appeals in Cook County contribute to their Commissioners. Law firms and lawyers are paid a percentage of the tax savings they achieve for their clients in front of this tax appeal board-they achieve savings of hundreds of millions of dollars every year. The heads of many of these law firms are also among the most powerful politicians and legislators in Illinois. Of course, these lawyers and law firms (coincidentally) have contributed millions of dollars to the campaign war-chests of the Commissioners and their staff at the tax appeal boards.

It would be entirely cynical and not for me to suggest that anything approximating graft were to occur at these agencies, though in the spirit of disclosure I do represent Cook County residents in three separate Federal lawsuits that allege that an institutionalization of pay to play (graft) occurs.

Or consider that almost half of the over 400 current sitting state judges in Cook County were slated and ultimately elected due to backing by the Judicial Slating Committee of the Cook County Democratic Party. The slating process is opaque and political-mired in the political traditions and conflicts of interest of old time Chicago politics. While I could be mistaken, I do not believe there are any Republican judges at the circuit level, in effect one person is judge-maker or de facto head of the Judicial Branch. The requirement of no conflicts of interests on the part of the slate maker does not exist.

After Governor Blagojevich was caught trying to peddle President Obama's open Senate seat, the President came into town on October 2010 to raise campaign funds for Governor Pat Quinn and Alexi Giannoulias, who was running for Obama's open Senate seat.

Coincidentally and because it is a small world as it were, Alexi Giannoulais's father had contributed $10,000 to Blagojevich. In 2003, Blagojevich's then fundraiser Tony Rezko (who has since been convicted of fraud and bribery) sponsored Demetris Giannoulias (Alexi's brother) for an appointment with the Illinois Finance Authority. Governor Blagojevich went on to appoint Demetris Giannoulias to the Illinois Finance Authority. On June 29, 2005, Alexis Giannoulias contributes $10,000 to Friends of Blagojevich. Coincidentally, on September 1, 2005, Rod Blagojevich reappointed Demetris Giannoulias to the Illinois Finance Authority Board.

From 2006-2008, Giannoulias, had worked for President Obama's campaign and contributed to it. Giannoulias is a fixture at the East Bank Club where he played basketball regularly with then Senator Obama. President Obama endorsed Giannoulias for State Treasurer in 2006. When Giannoulias ran for State Treasurer, he promised to revitalize the State's 529 college savings plan called Bright Start. Under his watch the college savings plan lost nearly $150 million before $77 million was recouped by a settlement.

By way of some background, Giannoulias was also the senior loan officer at his family's Broadway Bank. During his tenor there the Bank loaned a convicted mobster and pimp, Michael "Jaws" Durango $15.4 million. Broadway Bank also loaned Tony Rezko $23 million.

In August 2011, Governor Pat Quinn appointed Alexi Giannoulias to serve as chairman of the Illinois Community College Board.

Blagojevich intersected with many of the most powerful politicians in Illinois but somehow lacked their finesse because they remain in office while he is to begin serving his prison sentence on February 6, 2012.

If United States District Judge James Zagel is correct in remarking during sentencing that Blagojevich deserves his 14 year sentence because, "When it is the governor who goes bad, the fabric of Illinois is torn and disfigured and not easily repaired...The harm is the erosion of public trust in government," then the public must demand this trust be restored by taking the trouble to notice what actually happens in Illinois government every single day. If a message is intended to be sent to other politicians, it will not be delivered unless meaningful conflict of interest laws are instituted in Illinois. Otherwise, Blagojevich will like the three governors before him, be considered a one-off event.@
R Tamara de Silva

December 7, 2011

*By way of disclosure, I used to work with Sam E. Adam and Sam F. Adam, the same lawyers that represented Governor Blagojevich during his first trial when he was only convicted of one charge, obstruction of justice and walked on 23 remaining counts as a result of a hung jury. While I did not work on the Blagojevich case, Sam F. Adam is my mentor in the criminal law and I consider to him the best living criminal defense lawyer.